1.4 Business expansion Forms of business expansion Types of expansion Businesses constantly aim to grow in order to increase their profits and expand their sphere of influence, and they can do so either: , by changing their legal status (and becoming incorporated, for example), raising more capital, entering new lines of production, increasing efficiency, and modernising, or internally , by combining with other companies; this type of growth is known as . externally integration Forms of integration A company can integrate with other companies in the following ways: . This takes place when one firm accumulates enough shares of another company to take over its control and ownership. Such an operation can be: Takeover or acquisition , when both companies agree to the acquisition, friendly , when the target company is opposed to being purchased but cannot stop the process. hostile Acquired companies may keep their names and features – especially if they are well-known on the market – but change ownership. . This is when two existing companies, which usually operate in the same sector and are of similar size, decide to join together to form one new, bigger company. Merger . This is an agreement between two or more companies to work on a new project together by sharing their expertise, management, costs, profits and risks for a limited period of time, usually until their objectives have been achieved. Each company keeps their separate identity, and another specific business organisation is temporarily created. Joint venture Types of integration Integration can occur in three different ways depending on the companies which combine together. occurs when the businesses are competitors and work in the same sector; it aims to reduce competition and improve production. Horizontal integration occurs when the companies operate in the same sector but at different stages in the production or distribution chain. It can be: Vertical integration , when the other company is at a previous stage in the chain; backward , when the other company is at a later stage in the chain. forward It aims to reduce costs, getting greater control over supplies or better access to distribution channels. occurs when the businesses that combine are involved in completely different sectors and want to diversify their activities. Conglomerate integration